Are You Prioritising Your Salon’s Profit?
We want it all. The thriving business, the rockstar team, the growing sales, the loyal and 5-star clients, and a beautiful Salon space. Right?
More importantly, as the Salon CEO, we dream of having a life of more freedom & more profit, where we have something to show for all our hard work…
But when I meet Salon Owners and ask the question “is your Salon profitable?” more often than not, I hear the answer “I think so?”.
But what this tells me is that:
- Either you are paying your team first or not paying yourself enough
- Even WORSE, not paying yourself at all…
- OR you are paying yourself a good wage, but your business isn’t profitable, and you are suffering as a result.
This becomes stressful because you’re living week to week, always worrying about the business bringing in money. But this isn’t sustainable! If you sit back and wait for the profit to come, it never will.
This is a mistake I don’t want you to make.
If you don’t prioritise your profit, there will never be enough left over, so you’ll always be chasing money…
You need to make intentional decisions that will make your business profitable; put yourself and your business first. Believe me, it is possible!
In this blog, I will share with you 3 game-changing steps to manage your Salon’s profit, that will ensure you…
- Pay your bills & team on time without worrying about it each time it comes around
- Get paid your worth so you can live the life you always wanted
- Make enough to grow your Salon
It’s time you stop waiting for your business to make money, and instead, implement a proven strategy that will make your Salon profitable and successful once and for all.
Profit isn’t going to find you…
As a business owner, it’s easy to find yourself in a cycle of living week to week thinking that if you keep doing "all the things", profit will one day find you.
But this is a mistake, because if you aren’t prioritising or managing profit: there will never be enough. You’ll just be left with the scraps, the leftovers…
It’s easy to pay your team $35 an hour to ensure they stick around (even though they’re not even hitting their targets)…
Or feel profitable, because you’re paying yourself a high salary.
But if your BUSINESS isn’t profitable enough to grow, expand, or for you to step away and work ON the business…then you become the business.
If you stop working, there is no money.
The results you see in your business today are a representation of where your focus is. So you need to understand the choices you are making, be intentional about your focus, and need to plan to know where the money is going.
So, to be intentional about your profit-first focus, be careful to avoid these common mistakes:
- Your team is making good money and you pay them well… but they aren’t hitting their targets! On top of that, you aren’t paying yourself even close to what they’re paid…
This means the focus is on your team, not on profit.
- You are paying yourself a great salary or commission, but you’re struggling to grow your business or step away from the client work and work ON YOUR BUSINESS…
Then your focus is on your clients and you as a stylist, not as a true business owner.
If you shift your focus to profit, then you will be able to pay yourself well, your team will be paid well, they can grow, and you will always be able to pay your bills on time…
You won’t have a roadblock to continued growth!
My $20k Business Award
I remember when my Salon was in a stage of real growth. We grew from one salon to two and we went from 20 team members to 30 in a short time. We won the global Salon business award, three times over… and I had the opportunity to travel to London to accept the award.
But for me, living in New Zealand (down under), travelling to London would be a $20k trip…
And at the end of the financial year, when I looked at my profit, I was disappointed. I had all of these expectations as a Global Award Winning Salon…and I felt like I had failed…
But I soon came to realise: Hang on... I made the choice this year to spend $20k on the trip of a lifetime! So what I learned from this, was to reflect on my numbers and margins to include this important opportunity business cost.
I hadn’t factored this choice into my expectations.
Numbers are Powerful [Not Scary]
So you need to understand your numbers to sanity-check the choices you are constantly making. You have to learn how to consistently check them and read how your business is performing.
Within our Salon Mastery Program, I created a Salon CEO Dashboard that keeps track of all the choices we make as business owners. We track the financial side of your business, allowing you to ‘read’ what ‘the numbers’ are telling you.
But you have to be disciplined, do the work, and dive into the numbers…because your numbers will tell you exactly what to do next.
In the Hair & Beauty Industry, money and profit can be taboo topics. Often we’re scared of looking at the numbers, and finding out what’s happening under the hood…
…but if we look at and understand the numbers, then they will tell us exactly what to do.
Which, in the long-term, is a better outcome. Knowing your numbers puts you directly into the driver’s seat... I call it Powerful Profits, that’s you, in the power seat!
5 Money Buckets
‘Understanding the numbers’ means understanding the 5 “buckets” as I like to call them. The 5 buckets, under which, money coming into your business can fall.
The first bucket is our stock and inventory; Ranging from 13-20% of our sales, this needs to be managed tightly. This means ensuring those that are doing the weekly or monthly stock ordering have a clear budget…and stick to it.
Managing your usage and how much is wasted can be worth a few thousand dollars over 12 months. Who you choose as your supplier can also impact your profitability - so choose wisely.
The second bucket is wages; This is your biggest bucket. We want to ensure we don’t go over the 50% wage-to-income ratio - and I mean all your team, stylists, therapists, support staff, and FOH. It’s easy in this industry to creep over this benchmark…but honestly, as a salon business, you just can’t afford this level of wage bill!
Install a win: win system to ensure your team is operating effectively, easily hitting their targets, and earning a commission. You can do this without going over the 35-50% wage percentage mark, which would be hurting you and your business.
The third bucket is operations; The catch-all of everything, such as your marketing costs, your accounting, your office expenses, and Salon software. How much does it take to operate your business effectively? If this bucket is too full (ie you’re spending too much on operations), then you need to have a deep dive into your numbers and see where you can cut back if needed.
The fourth bucket is rent; We need this to be between 5-10% of your sales income. The only way to lower this as a percentage of your business is to get your income up.
The final bucket is profit; It needs to be prioritised first, because we need to shine a light on it just like we do with rent, operations, wages, and stock.
If there isn’t profit in your business, then one of your other 4 buckets is out of sync, so you need to find out what margin is over budget and then spend some time fixing this, to make a difference to your profit.
And if this keeps happening, then take a look at your pricing and team performance. This may need a review if you have some services or team members that aren’t profitable.
Even when you enjoy profitability in your business, I don’t want you to stop there. There are always going to be things that need updating, new team members, wages for you to pay yourself to take home to your family….
I want to work with you, to guide you in the right direction toward becoming a profitable Salon.
Discover how to avoid winging it (throwing spaghetti at the wall and seeing what sticks) through a clear & proven 9-part business plan to achieve Salon Mastery.
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